The State Of E-Commerce Returns

In retail, a product return is the process of a customer taking purchased merchandise back to the retailer and getting a refund. A customer’s refund may come in the original form of payment, an exchange for an identical item, an exchange for a different item, or a store credit.

As online shoppers have become more comfortable with returns and more savvy about individual retailer policies, it is clear they are not hesitating to send purchases back. In the U.S. alone, Statista estimates returns will cost retailers $550 billion by 2020, up 75.2% over a four-year period. The estimate does not include restocking expenses or certain other related losses.

How successfully an e-commerce company deals with returns can have a huge impact on customer engagement and retention, company reputation, and ultimately, profitability. For example, the industry standard average profit for an online sale is 10%. In the case of a $50 pair of shoes that ends up being returned the e-retailer earns $5 but may pay roughly $15 in return costs, resulting in a net loss of $10.

Invespcro found 92% of consumers would buy again from a retailer if the product return process is considered easy. Approximately 79% said they want free return shipping. Therefore, implementing an efficient and customer-centric returns policy is essential to the success of every retailer. E-commerce merchants are plagued with many of the same problems as brick-and-mortar stores, however, so policies should be structured using the industry’s best practices on situations like serial returners, fraudulent returns, and effective resale of returned items.

There are many ways e-retailers are attempting to reel in the losses they are suffering, including outsourcing returns and investing in equipment that will enable a more accurate visual representation of the items being sold. In the case of apparel retail, another way to reduce returns is better represent the fit of clothing. A survey cited by software-as-a-service provider Chargeback found the number one reason for retail returns is “incorrect product or size.” Clothing retailers including Express and J.Crew have worked to combat the problem by introducing models of different sizes wearing certain items so customers can more easily identify with a body type and virtually “try on” the styles.

Media reports have recently referred to returns as a “plague” and a “ticking time bomb” for e-commerce based on their ability to deplete profits, However, the situation has also led to new and still-emerging tools and solutions for retailers that can turn the threat into an opportunity. A new website from BrandNexity called Returnsusa.com hopes to capture some of this audience, and provide a solution to the E-Commerce returns headache. E-Commerce retailers might be wise to use the returns process as a chance to provide exceptional customer service, generate positive buzz with a generous policy, and build customer loyalty.

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